The Morning Update

The USD eased, oil prices weakened, and equity markets and US yields were mixed amid ongoing Sino-US tensions. The USD eased amid ongoing US-Sino tensions after President Trump stated he had no plans to talk to his Chinese counterpart this week. The Taiwan Dollar surged 3% in early trading, marking its largest gain since the 1980s, fuelled by speculation of government revaluation to secure US trade concessions. European and Asian equities are subdued, UK markets are closed, and US futures are declining as uncertainty regarding US trade policy weighs on the markets. A primary focus for investors will be the US and UK interest rate decisions on May 7th & 8th, respectively. Elsewhere, oil prices tumbled after OPEC+ agreed to a further surge in oil output, gold and silver prices strengthened, while Bitcoin prices weakened in early trading. The focus this week, Monday US Services PMI. Tuesday, China Caixin Services PMI, CAD Ivey Purchasing Managers Index. Wednesday, EU Retail Sales, Fed Interest Rate Decision & Policy Statement. Thursday, BoE Interest Rate Decision, and BoE Governor Bailey Speech. Friday, BoE's Governor Bailey Speech, and CAD Net Change in Employment.

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In the news. Chinese exporters 'wash' products in third countries to avoid Trump tariffs. Far-right candidate wins first round of Romania's election rerun. High rates and tariff uncertainty drag on the US housing market. EU food safety chief warns on bird flu threat to pigs. The EU eyes closer ties to trans-Pacific bloc as Trump jolts trade order. Warren Buffett to step down from Berkshire Hathaway. Prime Minister Carney will meet with US President Trump in Washington on Tuesday. Trump announces 100% tariff for movies produced outside the US. Senior party officials say that the Canada NDP interim leader is to be appointed by the end of the week.

In currency markets. The Taiwan Dollar (TWD) jumped 6.5% in the last two trading sessions on trade deal fears. Strategists remain optimistic on China despite US/China tensions helping AUD & NZD rally in early trading. CNY flat, while Asian currencies rally 0.8% on average against the USD. Trading currencies extend gains, with SEK flat. MXN & CHF up 0.15%, NOK & DKK gained by 0.3%, ZAR jumped 0.4%, JPY firmed by 0.6%, NZD strengthened by 0.75%, and AUD rallied 0.95%.

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In commodity markets. Oil prices weakened by 1.55%. Natural Gas & Copper prices strengthened by 1.4%. Gold prices rallied by 2%. Silver prices firmed by 1%. Wheat prices eased by 0.2%, and Soybean prices fell by 0.6%.

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CAD holds steady near seven-month highs, but the loonie is underperforming its peers amid weakening oil prices and ongoing trade uncertainty. Domestically, investors will focus on Tuesday's meeting between President Trump and Prime Minister Carney, with Carney saying he expects "difficult but constructive" talks with Trump. Oil prices have weakened by 7% in the last 7 days; year-over-year, oil is down nearly 27%. The impact of weakening oil prices is expected to continue causing headwinds to further CAD strengthening.

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EURCAD strengthens as weakening oil prices keep pressure on the loonie.

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EUR holds above 1.1300 amid a softer USD due to ongoing China/US trade tensions. The euro extends gains as the US continues under selling pressure due to resurfacing trade concerns and pre-Fed positioning ahead of the May 7th US Fed interest rate decision. Domestically, EUR Sentix Investor Confidence improved in May to -8.1, up from -19.5 in April. Investors will focus on the US ISM Services PMI, which is expected to hold steady at 50.6, above the key 50 level.

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GBPEUR remains stable in early trading as markets are somewhat sidelined ahead of the BoE interest rate decision.

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‍GBP retested 1.3300 in light holiday trading. The pound retested 1.3300 as the USD softened amid heightened economic uncertainty, including the lack of communication between the US and China. Domestically, financial markets have priced in a 100% likelihood of an interest rate cut from 4.5% to 4.25% on May 8th. Barclays Bank analysts expect further 25 bps cuts in June, August, and September to a 3.5% base rate in 2025. In 2026, analysts expect rates will continue to fall to potentially 2.75% by May 2026. Intraday, the US ISM Services PMI will help provide direction to the pound.

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